UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC FORM 20-F

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1 As filed with the Securities and Exchange Commission on June 30, 2009 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008 Commission file number: COMPANHIA PARANAENSE DE ENERGIA COPEL (Exact Name of Registrant as Specified in its Charter) Energy Company of Paraná (Translation of Registrant s Name into English) The Federative Republic of Brazil (Jurisdiction of Incorporation or Organization) Rua Coronel Dulcídio, Curitiba, Paraná, Brazil (Address of Principal Executive Offices) Paulo Roberto Trompczynski ri@copel.com Rua Coronel Dulcídio, 800, 3th floor Curitiba, Paraná, Brazil (Name, telephone, and/or facsimile number and address of company contact person) Title of Each Class Securities registered or to be registered pursuant to Section 12(b) of the Act: Preferred Class B Shares, without par value* American Depositary Shares (as evidenced by American Depositary Receipts), each representing one Preferred Class B Share Name of Each Exchange on Which Registered New York Stock Exchange New York Stock Exchange * Not for trading, but only in connection with the listing of American Depositary Shares on the New York Stock Exchange. Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the Issuer s classes of capital or common stock as of December 31, 2008: 145,031,080 Common Shares, without par value 398,177 Class A Preferred Shares, without par value 128,226,118 Class B Preferred Shares, without par value Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). N/A Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP IFRS Other If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

2 Table of Contents Page Presentation of Information... 1 Forward-Looking Statements... 2 Item 1. Identity of Directors, Senior Management and Advisers... 3 Item 2. Offer Statistics and Expected Timetable... 3 Item 3. Key Information... 3 Exchange Rates... 6 Risk Factors... 7 Item 4. Information on the Company The Company The Brazilian Power Industry Item 4A. Unresolved Staff Comments Item 5. Operating and Financial Review and Prospects Item 6. Directors, Senior Management and Employees Item 7. Major Shareholders and Related Party Transactions Related Party Transactions Item 8. Financial Information Legal Proceedings Dividend Payments Item 9. The Offer and Listing Item 10. Additional Information Memorandum and Articles of Association Material Contracts Exchange Controls Taxation Dividends and Paying Agents Documents on Display Item 11. Quantitative and Qualitative Disclosures about Market Risk Item 12. Description of Securities Other than Equity Securities Item 13. Defaults, Dividend Arrearages and Delinquencies Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Item 15. Controls and Procedures Item 16A. Audit Committee Financial Expert Item 16B. Code of Ethics Item 16C. Principal Accountant Fees and Services Item 16D. Exemption from the Listing Standards for Audit Committees Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Item 16F. Changes in Registrant s Certifying Accountant Item 16G. Corporate Governance Item 17. Financial Statements Item 18. Financial Statements Item 19. Exhibits Technical Glossary Signatures i

3 PRESENTATION OF INFORMATION In this annual report, we refer to Companhia Paranaense de Energia Copel, and, unless the context otherwise requires, its consolidated subsidiaries as Copel, the Company, we or us. References to (i) the real, reais or R$ are to Brazilian reais (plural) and the Brazilian real (singular) and (ii) U.S. dollars, dollars or U.S.$ are to United States dollars. Our audited consolidated financial statements as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008 included in this annual report have been prepared in accordance with the accounting practices adopted in Brazil ( Brazilian GAAP ), which are based on: Brazilian Law No. 6,404/76, as amended, including the provisions of Law Nos. 11,638/07 and 11,941/09, as amended, which we refer to collectively as Brazilian Corporate Law ( Brazilian Corporate Law ); the rules and regulations of the Brazilian Securities Commission, Comissão de Valores Mobiliários ( CVM ); the accounting manual of the Brazilian regulatory agency for the electricity sector, Agência Nacional de Energia Elétrica ANEEL ( ANEEL ); and the accounting standards issued by the Brazilian Institute of Independent Auditors, Instituto dos Auditores Independentes do Brasil. On December 28, 2007, Law No. 11,638 was enacted, altering, revoking and adding new provisions to Brazilian Corporate Law, for detailed information see Item 5. Operating and Financial Review and Prospects. The audited consolidated financial statements as of December 31, 2007 and for each of the two years in the period ended December 31, 2007, have been adjusted and are being restated as set forth in NPC No. 12 Accounting Policies, Changes in Accounting Estimates and Errors, as the Company has established January 1, 2006 as the transition date for the application of the provisions of Law Nos. 11,638/07 and 11,941/09. For more information, see Note 4 to our consolidated financial statements. Brazilian GAAP differs in certain material respects from accounting principles generally accepted in the United States ( U.S. GAAP ). For more information about the main differences between Brazilian GAAP and U.S. GAAP, and a reconciliation of our net income and shareholders equity from Brazilian GAAP to U.S. GAAP, see Note 40 to our consolidated financial statements. References in this annual report to the Common Shares, Class A Shares and Class B Shares are to our common shares, class A preferred shares and class B preferred shares, respectively. References to American Depositary Shares or ADSs are to American Depositary Shares, each representing 1 Class B Share. The ADSs are evidenced by American Depositary Receipts ( ADRs ). Certain terms are defined the first time they are used in this annual report. As used herein, all references to GW and GWh are to gigawatts and gigawatt hours, respectively, references to kw and kwh are to kilowatts and kilowatt hours, respectively, references to MW and MWh are to megawatts and megawatt hours, respectively, and references to kv are to kilovolts. These and other technical terms are defined in the Technical Glossary that begins on page 94. 1

4 FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements. We may also make written or oral forward-looking statements in our annual report to shareholders, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to: Brazilian political and economic conditions; economic conditions in the State of Paraná; developments in other emerging market countries; our ability to obtain financing; lawsuits; technical and operational difficulties related to the provision of electricity services; changes in, or failure to comply with, governmental regulations; competition; electricity shortages; and other factors discussed below under Item 3. Key Information Risk Factors. All forward-looking statements are expressly qualified in their entirety by this cautionary statement, and you should not place undue reliance on any forward-looking statement contained in this annual report. 2

5 Item 1. Identity of Directors, Senior Management and Advisers Not Applicable. Item 2. Offer Statistics and Expected Timetable Not Applicable. Item 3. Key Information SELECTED FINANCIAL DATA You should read the selected financial information presented below in conjunction with the consolidated financial statements and the notes thereto. The selected financial data as of December 31, 2008, 2007 and 2006 for the years ended December 31, 2008, 2007 and 2006 have been prepared in accordance with Brazilian GAAP including the provisions of Law Nos. 11,638/07 and 11,941/09. The selected financial data as of December 31, 2005 and 2004 and for the years ended December 31, 2005 and 2004 have been derived from our audited financial statements that are not included in this annual report, which have been prepared in accordance with Brazilian GAAP in force at the time of the preparation of such financial statements, not including the provisions of Law Nos. 11,638/07 and 11,941/09. On December 28, 2007, Law No. 11,638 was enacted, altering, revoking and adding new provisions to Brazilian Corporate Law, for detailed information see Item 5. Operating and Financial Review and Prospects. The selected financial data as of December 31, 2007 and for each of the two years in the period ended December 31, 2007, have been adjusted and are being restated as set forth in NPC No. 12 Accounting Policies, Changes in Accounting Estimates and Errors, as the Company has established January 1, 2006 as the transition date for the application of the provisions of Law Nos. 11,638/07 and 11,941/09. For more information, see Note 4to our consolidated financial statements. Our consolidated financial statements are prepared in accordance with Brazilian GAAP, which differs in certain material respects from U.S. GAAP. See Note 40 to our consolidated financial statements for a summary of the main differences between Brazilian GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of shareholders equity as of December 31, 2008 and 2007 and net income for the years ended December 31, 2008, 2007 and

6 As of and for the year ended December 31, (1) 2006 (2) (3) (R$ million) Income Statement Data: Brazilian GAAP Operating revenues... 8,305 7,920 7,421 6,801 5,533 Net operating revenues... 5,459 5,204 4,681 4,440 3,620 Operating expenses... (4,013) (3,635) (3,160) (3,620) (3,009) Operating income (4)... 1,446 1,569 1, Financial income (expenses), net (101) (19) Equity in results of investees (1) 9 2 Other income (expense), net... _ (11) (7) Income taxes... (458) (460) (558) (198) (196) Income (loss) before non-controlling interest and extraordinary item... 1,096 1,139 1, Non-controlling interest... (18) (31) (14) (16) (21) Net income (loss)... 1,078 1,108 1, Dividends declared U.S. GAAP Operating revenues... 8,305 7,920 7,421 6,801 5,533 Net operating revenues... 5,459 5,204 4,681 4,440 3,620 Operating income... 1,338 1,352 1, Net income (loss) , Balance Sheet Data: Brazilian GAAP Current assets... 3,573 3,288 3,080 2,472 1,653 Recoverable rate deficit (CRC) (5)... 1,320 1,250 1,194 1,182 1,197 Non-current assets... 2,118 1,978 1,828 2,047 2,222 Property, plant and equipment, net... 6,992 6,835 6,733 5,991 5,731 Total assets... 13,254 12,473 11,990 10,930 10,018 Loans and financing and debentures (current) Current liabilities... 1,963 1,941 2,648 2,352 2,337 Loans and financing and debentures (long-term)... 1,571 1,838 1,733 1,829 1,160 Long-term liabilities... 2,997 3,065 2,759 2,947 2,453 Shareholders equity... 8,053 7,236 6,376 5,487 5,108 Capital stock... 4,460 4,460 3,875 3,480 3,480 U.S. GAAP Total assets... 12,902 12,236 11,854 11,122 10,589 Long-term liabilities... 2,129 2,201 1,812 2,803 2,837 Shareholders equity... 8,551 7,893 7,221 6,011 5,530 4

7 As of and for the year ended December 31, (R$ except numbers of shares) Share and per share data: Brazilian GAAP Net income per share at year end: Dividends per share at year end: (6) Common shares Class A Shares Class B Shares Number of shares outstanding at year end (in thousands): Common shares , , , , ,031 Class A Shares Class B Shares , , , , ,220 Total , , , , ,655 U.S. GAAP Basic and diluted - earnings per share: Common shares Class A Shares Class B Shares Shares outstanding (weighted average in thousands): Common shares , , , , ,031 Class A Shares Class B Shares , , , , ,219 Total , , , , ,655 (1) On July 2, 2007, the shareholders approved a reverse split of our shares 1,000-for-1. For comparative purposes, this chart reflects the reverse split retroactively for the years of 2006, 2005, and (2) The 2006 financial information includes the accounts of our subsidiary UEG Araucaria. (3) The 2004 financial information includes the accounts of our subsidiary Centrais Elétricas do Rio Jordão S.A. - ELEJOR. As authorized by the CVM, ELEJOR was not originally included in our consolidated financial statements for 2004, since it did not have a significant impact in our consolidated financial statements. Since 2005, we have consolidated ELEJOR and for comparative purposes, we also consolidated ELEJOR for (4) Operating income before financial results and equity in results of investees. (5) Amounts due from the State of Paraná that were included in current assets totaled R$47.1 million in 2008, R$40.5 million in 2007, R$35.2 million in 2006, R$31.8 million in 2005 and R$29.5 million in Amounts due from the State of Paraná that were included in longterm assets totaled R$1,272.8 million in 2008, R$1,209.9 million in 2007, R$1,158.9 million in 2006, R$1,150.5 million in 2005 and R$1,167.9 million in See Note 9 to our consolidated financial statements. This item includes both current and non-current CRC account receivables. (6) We may elect to treat dividends for Brazilian tax purposes as interest on equity, subject to limitations under Brazilian Corporate Law. The amount of interest on equity included in our dividends was R$228.0 million in 2008, R$200.0 million in 2007, R$123.0 million in 2006 and the entire amount distributed in 2005 and

8 EXCHANGE RATES The Banco Central do Brasil (the Central Bank ) allows the real/u.s. dollar exchange rate to float freely, and it has intervened occasionally to control unstable movements in foreign exchange rates. The real may depreciate or appreciate against the U.S. dollar substantially in the future. For more information on these risks, see Risk Factors Risks Relating to Brazil. The following table provides information on the selling exchange rate, expressed in reais per U.S. dollar (R$/U.S.$), for the periods indicated. Exchange rate of Brazilian currency per U.S.$1.00 Year Low High Average(1) Year-end Source: Central Bank. (1) Represents the average of the exchange rates on the last day of each month during the relevant period. Month Low High December January February March April May June 2009 (until June 26, 2009) Source: Central Bank We have translated some of the U.S. dollar amounts contained in this annual report into reais. The rate used to translate such amounts was R$2.337 to US$1.00, which was the rate for the selling of U.S. dollars in effect as of December 31, 2008 as reported by the Central Bank of Brazil. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that the U.S. dollar amounts represent, or could have been converted into, reais. 6

9 RISK FACTORS Risks Relating to Brazil The current credit crisis and unfavorable general economic and market conditions may negatively affect our liquidity, customers, business, and results of operations. The global financial crisis may have impacts on our business and financial condition that we currently cannot predict. The continued credit crisis and related turmoil in the global financial system may have an impact on our business and our financial condition. The effect of this crisis on our customers and on us cannot be predicted. The current economic situation could also lead to reduced demand or lower prices for energy, which could have a negative effect on our revenues. Economic factors such as unemployment, inflation levels and the availability of credit could also have a material adverse effect on demand for energy and therefore on our financial condition and operating results. Our ability to access the capital markets may be restricted at a time when we would need financing, which could have an impact on our flexibility to react to changing economic and business conditions. Brazilian political and economic conditions could affect our business and the market price of the ADSs and our common shares. The Brazilian government s economic policies have in the past involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by these economic policies should they be reinstated. These and other measures could also affect the market price of the ADSs and our common shares. Fluctuations in the value of the Brazilian real against foreign currencies may result in uncertainty in the Brazilian economy and the Brazilian securities market, and they could have a material adverse effect on our net income and cash flow. In recent years, the Brazilian real has fluctuated against foreign currencies, and the value of the real may rise or decline substantially from current levels. For several years, and continuing through the first half of 2008, the Brazilian real strengthened regularly against the U.S. dollar, but beginning in the second half of 2008, it greatly depreciated against the U.S. dollar. For additional information about historical exchange rates and the impact of the depreciation of the real, see Item 3. Key Information Exchange Rates and Item 5. Operating and Financial Review and Prospects Results of Operations 2008 compared to Depreciation of the real increases the cost of servicing our foreign currency-denominated debt and the cost of purchasing electricity from the Itaipu power plant, a hydroelectric facility that is one of our major suppliers and that adjusts electricity prices based in part on its U.S. dollar costs. Depreciation of the real also creates additional inflationary pressures in Brazil that may negatively affect us. Depreciation generally curtails access to international capital markets and may prompt government intervention. It also reduces the U.S. dollar value of our dividends and the U.S. dollar equivalent of the market price of our common shares and the ADSs. If Brazil experiences substantial inflation in the future, our margins and the market price of the Class B Shares and ADSs may be reduced. Brazil has in the past experienced extremely high rates of inflation. More recently, Brazil s annual rates of inflation, measured in accordance with the variation of the Índice Geral de Preços Disponibilidade Interna ( IGP-DI ) index, were 3.8% in 2006, 7.9% in 2007, 9.1% in 2008 and (0.73)% for the five months ended May 31, The Brazilian government has in the past taken measures to combat inflation, and public speculation about possible future government actions have had significant negative effects on the Brazilian economy. Although our concession contracts provide for annual readjustments based on inflation indices, if Brazil experiences substantial inflation in the future, and the Brazilian government adopts inflation control policies similar to those adopted in the past, our costs may increase faster than our revenues, our operating and net margins may decrease and, if investor confidence lags, the price of the Class B Shares and ADSs may fall. Inflationary pressures may also curtail our ability to access foreign financial markets and may lead to further government intervention in the economy, 7

10 including the introduction of government policies that may adversely affect the overall performance of the Brazilian economy. Changes in Brazilian tax policies may have an adverse effect on us. The Brazilian government has changed its tax policies in ways that affect the electricity sector, and it may do so again in the future. These changes include amendments to the tax rates and, occasionally, collection of temporary taxes related to specific governmental purposes. Some of such measures may lead to an increase of taxes and we may be unable to adjust our tariffs accordingly, in which case we may be adversely affected. Risks Relating to Our Operations We are controlled by the State of Paraná, and government policy could have a material adverse effect on us and on our business. We are controlled by the State of Paraná, which holds 58.6 % of our outstanding common voting shares as of the date of this annual report, and whose interests may differ from other shareholders. The State of Paraná has the power to control all our operations, including the power to: elect a majority of the members of our Board of Directors; determine the outcome of any action requiring common shareholder approval, including transactions with related parties and corporate reorganizations; and Government policies undertaken by the State of Paraná in accordance with federal law could have a material adverse effect on us and our business, results of operations, financial condition or prospects. We are largely dependent upon the economy of the State of Paraná. Our market for the majority of our sales of electricity is located in the State of Paraná. Although a more competitive market involving possible sales to customers outside Paraná might develop in the future, our business depends and is expected to continue to depend to a very large extent on the economic conditions of Paraná. We cannot assure you that economic conditions in Paraná will be favorable to us in the future. The GDP of the State of Paraná grew 5.8% in 2008, while Brazil s GDP increased 5.1% during the same period. We are involved in several lawsuits that could have a material adverse effect on our business if their outcome is unfavorable to us. As a result of our operating activities in the electric energy sector, our contractual relationships and our investments, we are the defendant in several legal actions, mainly relating to civil, administrative, labor and tax claims. The outcome of these proceedings is uncertain and, if determined against us, may result in obligations that could materially affect our results of operations. For additional information, see Item 8. Financial Information Legal Proceedings. The development of power generation projects is subject to substantial risks. In connection with the development of a generation project, we generally must obtain feasibility studies, governmental concessions or authorizations, permits and approvals, condemnation agreements, equipment supply agreements, engineering, procurement and construction contracts, sufficient equity and debt financing and site agreements, each of which involves third parties over which we have no control. In addition, project development is subject to environmental, engineering and construction risks that can lead to cost overruns, delays and other impediments to timely complete within a project s budget. We cannot assure you that all required permits and approvals for our projects will be obtained, that we will be able to secure private sector partners for any of our projects, that we or any of our partners will be able to obtain adequate financing for our projects or that financing will be available on a non-recourse basis to us. If we are unable to complete a project, whether at the initial 8

11 development phase or after construction has commenced, we may not be able to recover our investment in such a project, which may be substantial. Risks Relating to the Brazilian Electricity Sector We are uncertain as to the renewal of our concessions. We carry out our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Federal Government. Our concessions range in duration from 20 to 35 years, with the first expiration date in Three of our generation facilities are subject to non-renewable concessions, the first of which will expire in Our transmission and distribution concessions will expire in July 2015, with options to renew for an additional 20 years. The Brazilian constitution requires that all concessions relating to public services be awarded through a bidding process. Under laws and regulations specific to the electric sector, the federal government may renew existing concessions for additional periods of up to 30 years without a bidding process, provided that the concessionaire has met minimum performance standards and that the proposal is otherwise acceptable to the Federal Government. For public service concessions, the Federal Government decides whether to renew contracts or to require a new bidding process based on, among other things, the public interest. Therefore, there can be no assurance that our concessions will be extended, and, if they are extended, the conditions under which such extension will be granted. If our concessions are not extended, or are extended under less favorable conditions, our operations and financial results may be adversely affected. The tariffs that we charge for sales of electricity to captive customers are determined pursuant to a concession agreement with the Brazilian government through ANEEL, and our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are unfavorable to us. Within the parameters of our distribution concession contract, ANEEL has a certain degree of discretion to establish the rates we charge our captive customers, free customers and other generation companies that use our distribution system. Such rates are determined pursuant to concession contract entered with ANEEL and in accordance with ANEEL's regulatory decision-making authority. Our distribution concession agreement and Brazilian law establish a price cap mechanism that permits three types of tariff adjustments: (i) annual readjustment (reajuste anual), (ii) periodic revision (revisão periódica), and (iii) extraordinary revision (revisão extraordinária). We are entitled to apply each year for the annual readjustment, which is designed to offset some effects of inflation on tariffs and pass through to customers certain changes in our cost structure that are beyond our control, such as the cost of electricity we purchase from certain sources and certain other regulatory charges, including charges for the use of transmission facilities. In addition, ANEEL carries out a periodic revision every four years that is aimed at identifying variations in our costs as well as setting a factor based on our operational efficiency that will be applied against the index of our ongoing annual tariff readjustments, the effect of which is to ensure that we share the benefits of improved economies of scale with our customers. We are also entitled to request an extraordinary revision of our tariffs if unpredictable costs significantly alter our cost structure. We cannot assure you that ANEEL will establish tariffs at rates that are favorable to us. In addition, to the extent that any of these adjustments are not granted by ANEEL in a timely manner, our financial condition and results of operations may be adversely affected. Certain customers in our concession area may cease to use our distribution system. Our distribution business generates a large portion of its revenues by charging customers a tariff to use its distribution system. Large electricity customers within the geographic area of our concession that meet certain regulatory requirements may qualify as Free Customers ( Free Customers ). A Free Customer, under some circumstances, is entitled to connect directly to the main national transmission network known as the Interconnected Transmission System ( Interconnected Transmission System ), in which case it ceases to pay our distribution tariff. This loss may adversely affect our revenues and results of operations. 9

12 In addition, some customers in our concession area produce their own energy. Although many of these customers continue to use our distribution system to transport the energy they produce, we cease to collect a distribution tariff if a self-producing customer discontinues its use of our distribution system. Our results of operations will be adversely affected if the number of self-producing customers that do not pay our distribution tariff increases. Our operating results depend on prevailing hydrological conditions and the availability of natural gas. The impact of an electricity shortage and related electricity rationing, as in 2001 and 2002, may have a material adverse effect on our business and results of operations. We are dependent on the prevailing hydrological conditions in the geographic region in which we operate. In 2008, according to data from the Energy Research Company, Empresa de Pesquisa Energética ( EPE ), more than 80% of Brazil s electricity supply came from hydroelectric generation facilities. Our region is subject to unpredictable hydrological conditions, with non-cyclical deviations from average rainfall. The most recent period of low rainfall was in the years prior to 2001, when the Brazilian government instituted the Rationing Program, a program to reduce electricity consumption that was in effect from June 1, 2001 to February 28, A recurrence of poor hydrological conditions that result in a low supply of electricity to the Brazilian market could cause, among other things, the implementation of broad electricity conservation programs, including mandated reductions in electricity consumption. We cannot assure you that periods of severe or sustained below-average rainfall will not adversely affect our future financial results. In addition, if a shortage of natural gas were to occur, this would increase the general demand for energy in the market and therefore increase the risk that a rationing program would be instated. We are subject to comprehensive regulation of our business, which fundamentally affects our financial performance. Our business is subject to extensive regulation by various Brazilian regulatory authorities, particularly ANEEL. ANEEL regulates and oversees various aspects of our business and establishes our tariffs. If we are obliged by ANEEL to make additional and unexpected capital investments and are not allowed to adjust our tariffs accordingly, or if ANEEL modifies the regulations related to such adjustment, we may be adversely affected. In addition, the implementation of our strategy for growth, as well as the ordinary carrying out of our business may be adversely affected by governmental actions such as changes to current legislation, the termination of federal and state concession programs, creation of more rigid criteria for qualification in future public energy auctions, or a delay in the revision and implementation of new annual tariffs. If we are required to conduct our business in a manner substantially different from our current operations as a result of regulatory changes, our operations and financial results may be adversely affected. The regulatory framework under which we operate is subject to legal challenge. The Brazilian government implemented fundamental changes in regulation of the power industry under 2004 legislation known as the New Industry Model Law, Lei do Novo Modelo do Setor Elétrico. Challenges to the constitutionality of the New Industry Model Law are still pending before the Brazilian Supreme Court. If all or part of the New Industry Model Law were held to be unconstitutional, it will have uncertain consequences for the validity of existing regulation and the further development of the regulatory framework. The outcome of the legal proceedings is difficult to predict, but they could have an adverse impact on the entire energy sector, including our business and results of operations. 10

13 We may be forced to purchase energy in the spot market to meet customer demand, and the price of spot market energy purchases may be substantially higher than the price of energy under our long-term energy purchase agreements. Under the New Industry Model Law, electric energy distributors, including us, must contract, through public bids conducted by ANEEL, 100.0% of the forecasted electric energy demand for their respective distribution concession areas, up to five years prior to the actual delivery of electric energy. If our forecasts fall significantly short of actual electricity demand, we may be forced to make up for the shortfall by entering into short-term electricity purchase agreements. We cannot guarantee that our forecasts for energy demand in our distribution concession area will be accurate, and if they are not, we may face significantly higher prices in the spot market to satisfy our electric energy distribution obligations, as well as penalties imposed by the Electric Energy Trading Chamber, Câmara de Comercialização de Energia Elétrica ( CCEE ). We generate a portion of our operating revenues from Free Customers who may seek other energy suppliers upon the expiration of their contracts with us. During 2008, Copel Geração e Transmissão provided electricity to 15 Free Customers, representing approximately 2.1% of our gross operating revenues from energy sales and approximately 2.8% of the total quantity of electricity sold by us. Approximately 16.6% of the megawatts sold under contract to such customers are set to expire in There can be no assurance that, upon the expiration of these contracts, the Free Customers will purchase energy from us. Our equipment, facilities and operations are subject to numerous environmental and health regulations which may become more stringent in the future and may result in increased liabilities and increased capital expenditures. Our distribution, transmission and generation activities are subject to comprehensive federal, state and local legislation, as well as supervision by Brazilian governmental agencies that are responsible for the implementation of environmental and health laws and policies. These agencies could take enforcement action against us for our failure to comply with their regulations and with requirements established for the maintenance of our environmental licenses. These actions could include, among other things, the imposition of fines and revocation of licenses. It is possible that enhanced environmental and health regulations will force us to allocate capital expenditures towards compliance, and consequently, divert funds away from planned investments. Such a diversion could have a material adverse effect on our financial condition and results of operations. ANEEL could penalize us for failing to comply with the terms of our concessions, and we may not recover the full value of our investment in the event that any of our concessions are terminated. Our concessions are for terms of 20 to 35 years and may be extended if certain conditions are met. In the event that we fail to comply with any term of our concessions or applicable laws, ANEEL may impose penalties on us, which may include the imposition of substantial fines (in some instances, up to two percent of a concessionaire s revenues in the fiscal year immediately preceding the assessment) and restrictions on our operations. ANEEL may also terminate our concessions prior to the expiration of their terms if we fail to comply with their provisions or if ANEEL determines, through an expropriation proceeding, that terminating our concession would be in the public interest. If ANEEL terminates any of our concessions before their expiration, we would not be able to operate the segment(s) of our business that had been authorized by the concession. Furthermore, any compensation that we may receive from the Federal Government for the unamortized portion of our investment may not be sufficient for us to recover the full value of our investment. In addition, concessions for new generation projects (such as Mauá, in our case) are non-extendable, meaning that upon expiration, the concessionaire must again complete a competitive bidding process. The early termination or non-renewal of any of our concessions or the imposition of severe fines or penalties by ANEEL could have a material adverse effect on our financial condition and results of operations. See The Brazilian Power Industry-Concessions. 11

14 Our reported financial condition and results could be adversely affected by changes in Brazilian accounting principles. Brazilian accounting principles have been undergoing rapid change pursuant to legislation adopted late in 2007, requiring, among other things, that Brazilian accounting standard-setters move toward convergence with IFRS. Changes that took effect in 2008 have been given effect for all periods presented in our audited consolidated financial statements and are described in Note 2 to the audited consolidated financial statements. Many new accounting standards have been adopted but have not yet taken effect, while others are expected in the near future. We cannot yet predict the effects on our financial statements that will result when these changes take effect. These effects could include reducing our reported revenues, operating income or net income, or adversely affecting our balance sheet. Such changes could adversely affect our compliance with financial covenants under our financing facilities. They could also reduce the ability of our subsidiaries to pay dividends to us, or our ability to pay dividends to our shareholders. Two aspects of IFRS that could have a material impact on us if they are adopted in Brazil concern the recognition of regulatory assets and accounting for our concessions. Under Brazilian accounting principles and U.S. GAAP, we recognize as assets and liabilities certain amounts that we are legally entitled to collect, or are required to pay, in the future under the regulations applicable to our distribution business. Accounting for regulatory assets and liabilities in this way has a material effect on our reported financial condition and results of operations. See Item 5. Operating and Financial Review and Prospects. Currently, there are authoritative interpretations of IFRS that we believe might limit our ability to recognize these assets and liabilities, as well as the manner in which we account for our concessions. We and other similarly situated Brazilian companies are discussing these points with the Brazilian standard-setters and regulators, but we cannot predict the outcome of those discussions or the ultimate manner in which IFRS or Brazilian standards based on IFRS will apply to us. Risks Relating to the Class B Shares and ADSs As a holder of ADSs you will generally not have voting rights at our shareholders meetings. In accordance with Brazilian Corporate Law and our bylaws, holders of the Class B Shares, and thus of the ADSs, are not entitled to vote at our shareholders meetings except in limited circumstances. This means, among other things, that you, as a holder of the ADSs, are not entitled to vote on corporate transactions, including any proposed merger with other companies. In addition, in the limited circumstances where the holders of Class B Shares are able to vote, holders may exercise voting rights with respect to the Class B Shares represented by ADSs only in accordance with the provisions of the deposit agreement relating to the ADSs. There are no provisions under Brazilian Corporate Law or under our bylaws that limit ADS holders ability to exercise their voting rights through the depositary bank ( Depositary ) with respect to the underlying Class B Shares. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, holders of our Class B Shares will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. In accordance with the deposit agreement, we will provide the notice to the Depositary, which will in turn, as soon as practicable thereafter, mail to holders of ADSs the notice of such meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the Depositary how to vote their shares. Because of this extra procedural step involving the Depositary, the process for exercising voting rights will take longer for ADS holders than for holders of Class B Shares. ADSs for which the Depositary does not receive timely voting instructions will not be voted at any meeting. 12

15 As a holder of ADSs you will have fewer and less well-defined shareholders rights in Brazil than in the United States and certain other jurisdictions. Our corporate affairs are governed by our bylaws and Brazilian Corporate Law, which may differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in certain other jurisdictions outside Brazil. Under Brazilian Corporate Law you and the holders of the Class B Shares may have fewer and less well-defined rights to protect your interests in connection with actions taken by our Board of Directors or the holders of Common Shares than under the laws of some jurisdictions outside Brazil. Although Brazilian law imposes restrictions on insider trading and price manipulation, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or markets in certain other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of minority shareholder interests may be less developed and enforced in Brazil than in the United States, which could potentially disadvantage you as a holder of the preferred shares and ADSs. In addition, shareholders in Brazilian companies must hold five percent of the outstanding share capital of a corporation in order to have standing to bring shareholders derivative suits, and shareholders in Brazilian companies ordinarily do not have standing to bring a class action. You may be unable to exercise preemptive rights relating to the preferred shares. You will not be able to exercise the preemptive rights relating to the Class B Shares underlying your ADSs unless a registration statement under the United States Securities Act of 1933 as amended ( Securities Act ), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. The Depositary will not offer rights to you as a holder of the ADSs unless the rights are either registered under provisions of the Securities Act or are subject to an exemption from the registration requirements. We are not obligated to file a registration statement with respect to the shares or other securities relating to these rights, and we cannot assure you that we will file any such registration statement. Accordingly, you may receive only the net proceeds from the sale of your preemptive rights by the Depositary or, if the preemptive rights cannot be sold, they will be allowed to lapse. If you are unable to participate in rights offerings, your holdings may also be diluted. If you exchange your ADSs for Class B Shares, you risk losing the ability to remit foreign currency abroad and Brazilian tax advantages. Brazilian law requires that parties obtain a certificate of registration from the Central Bank in order to be allowed to remit foreign currencies, including U.S. dollars, abroad. For the ADSs, the Brazilian custodian for the Class B Shares has obtained the necessary certificate from the Central Bank for the payment of dividends or other cash distributions relating to the preferred shares or upon the disposition of the preferred shares. If you exchange your ADSs for the underlying Class B Shares, however, you may only rely on the custodian s certificate for five business days from the date of exchange. Thereafter, you must obtain your own certificate of registration or register in accordance with Central Bank and CVM rules, in order to obtain and remit U.S. dollars abroad upon the disposition of the Class B Shares or distributions relating to the preferred shares. If you do not obtain a certificate of registration, you may not be able to remit U.S. dollars or other currencies abroad and may be subject to less favorable tax treatment on gains with respect to the preferred shares. If you attempt to obtain your own certificate of registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to the preferred shares or the return of your capital in a timely manner. The custodian s certificate of registration and any certificate of foreign capital registration you obtain may be affected by future legislative changes. Additional restrictions may be imposed in the future on the disposition of the underlying Class B Shares or the repatriation of the proceeds from disposition. 13

16 The Brazilian government may impose exchange controls and restrictions on remittances abroad which may adversely affect your ability to convert funds in reais into other currencies and to remit other currencies abroad. You may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion of reais into foreign currencies. The Brazilian government could choose to impose this type of restrictions if there is a deterioration in Brazilian foreign currency reserves or a shift in Brazil s exchange rate policy. Reimposition of these restrictions would hinder or prevent your ability to convert dividends, distributions or the proceeds from any sale of Class B Shares, as the case may be, from reais into U.S. dollars or other currencies and to remit those funds abroad. We cannot assure you that the Brazilian government will not take similar measures in the future. The relative volatility and illiquidity of the Brazilian securities markets may impair your ability to sell the Class B Shares underlying the ADSs. The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and elsewhere, and are not as highly regulated or supervised as some of these other markets. The illiquidity and relatively small market capitalization of the Brazilian equity markets may cause the market price of securities of Brazilian companies, including our ADSs and Class B Shares, to fluctuate in both the domestic and international markets, and may substantially limit your ability to sell the Class B Shares underlying your ADSs at a price and time at which you wish to do so. Item 4. Information on the Company THE COMPANY We are engaged in the generation, transmission, distribution and sale of electricity in the Brazilian State of Paraná, pursuant to concessions granted by the Brazilian regulatory agency for the electricity sector, ANEEL. We also provide telecommunications and other services. At December 31, 2008, we generated electricity at 17 hydroelectric plants and one thermoelectric plant, for a total installed capacity of 4,549.6 MW (approximately 99.6% of which is hydroelectric). Including the installed capacity of generation companies in which we have an ownership interest, our total installed capacity is 5,159.4 MW. Our electric power business is subject to comprehensive regulation by ANEEL. We hold concessions to distribute electricity in approximately 98.5% of the 399 municipalities in the State of Paraná and in the municipality of Porto União in the State of Santa Catarina. At December 31, 2008, we owned and operated 1,835.2 km of transmission lines and 179,187.6 km of distribution lines, constituting the one of the largest distribution networks in Brazil. Of the electricity volume we supplied to our Final Customers during 2008: 38.2% was to industrial customers; 25.8% to residential customers; 19.1% to commercial customers; and 16.9% to rural and other customers. Key elements of our business strategy include the following: expanding our power generation, transmission, distribution, and telecommunication systems; expanding our generation business sales to Free Customers both inside and outside the State of Paraná; seeking productivity improvements in the short term and sustained growth in the long term; 14